Obama loses against banks in Congress

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By S.A. Miller

Senate Democrats handed President Obama a rare congressional setback Thursday by helping to scrap his plan to give bankruptcy judges the power to force banks to reduce mortgages payments for struggling homeowners.

Critics said Mr. Obama failed to use any muscle to preserve the "cram-down" provision, but the president's allies in the Democrat-led Congress blamed lobbying by the banking industry for killing the bill.

Mortgage banking industry lobbyists, who gave more than $1.8 million in campaign contributions to Senate members in 2008, fought fiercely against the legislation, which was offered as an amendment to a housing bill.

Among those opposing the provision was Pennsylvania Sen. Arlen Specter, who demonstrated in his first vote since joining the Democratic Party that he will not be a rubber stamp for the administration.

Mr. Obama meanwhile scored a victory in the House, where lawmakers overwhelmingly passed a bill that imposes new rules on credit card companies and protects consumers from sudden interest rate increases on existing balances.

Senate Majority Whip Richard J. Durbin, Illinois Democrat and the prime sponsor of the cram-down amendment, led intense negotiations for weeks but failed to assuage the bankers. He vowed to bring the legislation up again.

"At some point, the senators in this chamber will decide that the bankers shouldn't write the agenda for the United States Senate," he said, arguing that the measure would save about 1.7 million homeowners from foreclosure.

Senate Minority Leader Mitch McConnell, Kentucky Republican, said the bipartisan rejection of the measure demonstrated that the plan had been ill-conceived. The cram-down amendment, he said, would lead banks to raise mortgage rates because of the greater uncertainty in the market.

"It's clear that we cannot fix the housing problem by implementing bad policies. The vote today was a bipartisan rejection of an interest rate hike, which is exactly the wrong solution for jobs, homeowners and the economy," Mr. McConnell said.

On the key vote, Senate Democratic leaders could muster only 45 votes, far short of the 60 needed to end a filibuster and force a vote on the provision. A dozen Democrats joined 39 Republicans in opposing the cram-down amendment. No Republicans supported the amendment.